Crowdfunding to start a business is never easy nor is its success guaranteed-well nothing really is, not even venture capital where 75 % of start-ups funded by venture capital never return investors their money. What about a loan? Well…’if you are taking out a loan to start a business you are a moron, ’ that’s according to billionaire entrepreneur Mark Cuban, who also doubles up as a judge on the popular ABC show Shark Tank. Cuban’s reason for saying this is because there are so many uncertainties in starting a business yet the loan payments are a must. Here is the video.
However, with the growth of the internet, all is not lost, crowdfunding is a viable option that you can use to raise money and get customers while doing it. Even Cuban sees the promise in crowdfunding, “sweat equity is the best equity, I would turn to crowdfunding like Kickstarter before I look to investors,” he says. Crowdfunding involves raising money from the masses by convincing people to believe in your idea and give money, funders (called backers in crowdfunding lingo) also get rewards from the idea owner after they reach their target. Here are the steps to follow to pull off a successful crowdfunding campaign.
- Tell Your Story
So you have come up with the most amazing idea that bound to change the world as we know it- which is great, but until people know about it, it won’t do you much good. Telling your story is an essential part of the crowdfunding campaign, this is where you create a connection with your audience and appeal to their sense of purpose, fear, passion, compassion etc. Whatever your angle is; do it well. To tell a compelling story, make video central to your pitch, the video needs to show what you are doing (what your product or service is), why you are doing it (the inspiration behind it), how (what special approach are you using that makes you different) and where (show the areas you will impact; location, industries, demographics etc.).
A compelling video doesn’t have to cost an arm and a leg to make, use your phone in a quiet, well-lit area and with a steady hand or a tripod stand, shoot a clip of yourself speaking to the camera about the product/service, capture your prototypes, samples etc. You can even involve a few friends to help act out a background story to make it more interesting. Edit the clips with a free video editing software like Lightworks or Filmora. PS: When using your phone to film, hold it horizontally in landscape mode.
A study investigating over 48,500 crowdfunding projects (with a combined funding of over $237 million) found that personal networks and the underlying quality of projects are associated with the success of a crowdfunding campaign. As such, a creative, well planned promotional campaign within your existing community-both online and offline, will help you reach your funding targets. Promotion should start months before you even begin fundraising, start expanding your personal networks in anticipation of your campaign; understand which communities will be interested in your product and know where they are found. Be increasingly active on social media; Facebook and LinkedIn groups, Twitter discussions, help people out with information whenever you can, take it a notch higher by meeting some of them in person (do it in a safe public environment).
When the time for the campaign arrives, find a group of core supporters who will be part of the promotion team in charge of amplifying your posts further into their own networks. Be deliberate about it, approach friends, go back to the networks and communities you’ve calculatingly become part of. Tell them you are forming a team for promoting a crowdfunding campaign for that amazing product they’ve heard you talk so much about-yeah the one that is going to change the world. Ask them to join your promotion team and explain what role they are going to play. Once you have core supporters, a compelling pitch and video you are ready to go.
- Craft Rewards
Most crowdfunding platforms provide an option of promising rewards to funders while setting up your campaign; rewards motivate potential backers to contribute and team members to work harder. Craft a reward that is going to create a connection between your backers and your company-remember the people who back you are potential customers too.
The rewards can range, you can give limited editions of your product to a select number of backers, e.g. a limited coloured phone cover, a honey jar with their name engraved on it, a chance to feature in the creation process (the authors of popular book Business Model Generation convinced over 470 people from 45 countries -to pay up to $243 to be part of writing process). However, only promise what you can deliver-if you can’t send out name-engraved honey jars to 20,000 people don’t promise so. Crowdfunding platforms realise this and provide the option to limit rewards to people who contribute up to certain amounts or early backers.
- Provide Updates
Once the contributions start coming in, update your backers and the team about the progress, send them messages e.g. ‘only 10% left to reach funding target, we are almost there’ this could potentially rejuvenate backers and trigger another round of aggressive funding as people strive to meet the final target. Giving updates also shows accountability and you should continue the updates even after the campaign is over. You backers trusted you with their cash, they have a right to know how the project is advancing. To get started crowdfunding here are a few platforms to explore; Indiegogo, Kickstarter based in the US, Babandu, and M-Changa from Kenya, StartMe, GofundmeSA and ThundaFund from South Africa and StartCrunch-Nigeria.